COMMISSIONER OF INCOME TAX V. MANOJ KUMAR SEKHRI

ITA/101/2004

AI Insights

The case involves an appeal by the Commissioner of Income Tax against the decision of the Income Tax Appellate Tribunal, which had deleted certain additions made by the Assessing Officer to the income of the respondent, Sh. Manoj Kumar Sekhri, for the assessment year 1994-95. The additions pertained to two cash entries alleged to be foreign gifts. The Tribunal and CIT(A) had found the gifts to be genuine, but the High Court, referencing previous decisions and the lack of relationship or occasion for the gift from Piara Singh Johal, restored the Assessing Officer's decision regarding this particular entry.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 717838 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 29-01-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Jalandhar-II Vs. Manoj Kumar Sekhri, Berger Paints India Ltd. Vs. CIT, Lal Chand Kalra Versus CIT, Jaspal Singh Versus CIT, Sajan Dass and Sons Versus CIT, CIT, West Bengal II v. Durga Prasad More, Sumanti Dayal v. CIT, Shri Hanuman Dass Versus The Commissioner of Income Tax, Jalandhar and another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: RAJIV SHARMA; S K MUKHI
• Assessee Lawyers: VIVEK SETHI
• Keywords: Banking channel; Bogus Gift; Foreign gifts; Income from undisclosed sources; Remittance
• Section: 271(1)(c); 260-A

Judgement Text

" ITA No. 101 of 2004 1 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 101 of 2004 (O&M) Date of Decision: 29.01.2014 The Commissioner of Income Tax(Central), Ludhiana ... Appellant vs. Sh. Manoj Kumar Sekhri ... Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MRS. JUSTICE ANITA CHAUDHRY Present:- Mr. Vivek Sethi Advocate for the appellant. Mr. Rajiv Sharma, Advocate for Mr. S.K. Mukhi, Advocate for the respondent. --- ANITA CHAUDHRY, J. 1. The revenue has approached this Court by filing the appeal under Section 260-A of the Income Tax Act, 1961 (for short, 'the Act') laying challenge to the order dated 13.11.2003 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, 'the Tribunal') in ITA No. 619(ASR)/ 1997 in respect of assessment year 1994-95. 2. The appellant has claimed that the following question of law would emerge from the order of the Tribunal for determination by this Court:- “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the addition of `1,85,000/- and ` 61,788/- allegedly received by the assessee as foreign gifts? Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 101 of 2004 2 3. Briefly, the facts of the case are that, for the assessment year 1994-1995, respondent-assessee filed the return on 30.10.1995 showing his income to be `1,20,280/-. As per computation sheet the assessee showed interest income from M/s Subhash Chander & Sons, Nurmahal on his old deposits, besides, interest on FDRs, saving funds account and interest earned on KVPs. However, the Assessing Officer called upon the assessee to render explanation in respect of some entries, including cash entries of `1,85,000/- made on 16.08.1993 and of `61788/- dated 24.02.1994 in the account of the assessee. During the course of assessment proceedings, the assessee replied to the questionnaire and furnished explanation. With regard to the aforesaid cash entries, he submitted that he received $6000 and $2000 as foreign gift from Mohinder Singh Handa, his uncle and $2450 from one Piara Singh Johal. According to the assessee both these persons were residing abroad. The assessee also furnished the copies of cashier's cheques and fax letters sent by the creditors regarding sending the amount to the assessee. The Assessing Officer doubted the explanation put forth by the assessee. The Assessing Officer took notice of the fact that Mohinder Handa was a distant relation of the assessee while Piara Singh Johal was found to be not related in any manner. The Assessing Officer also noted that the parents of the assessee were residing in USA and they had not made any gifts, hence, the alleged creditors had no occasion to make the gift in favour of the assessee. The Assessing Officer vide order dated 27.02.1997 held that since the assessee failed to establish the source and capacity of the persons making the gift, therefore, Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 101 of 2004 3 ordered that the said amount be added to be income of the assessee on account of his income from undisclosed sources, as it was bogus gift re-routed as a foreign remittance. The Assessing Officer also gave directions for initiating penalty proceedings as prescribed under Section 271(1)(c) of the Income Tax Act. 4. The assessee appealed before the Commissioner of Income Tax (Appeals), Jalandhar(to be referred as, 'the CIT(A)) by filing an appeal, challenging the addition of amount of `1,85,000/- and `61788/-, besides some other additions ordered by the Assessing Officer. The CIT(A) vide order dated 3.9.1997,while noticing the fact that the amount of `1,85,000/- was credited into the account of the assessee by way of proceeds of foreign draft, coupled with the confirmation from Mohinder Singh Handa and his employer certificate, certifying about the employment of Mohinder Singh Handa in General Motors, Canada with gross income of $57,524/-, concluded that the assessee has not only proved the identity of creditor, but his capacity also and since the remittance of money was through banking channel, the genuineness of the transactions could not be raised. With regard to entry of `61,788/- the CIT(A) concluded that the assessee received the cheque of $2000 on 24.02.1994, which was sent to the bank for collection on 04.04.1994 and the amount was credited into the assessee's account on 20.05.1994, therefore, the same did not pertain to the accounting period. Consequently, CIT(A) ordered deletion of both the amounts from the income of the assessee. The revenue, dis-satisfied with the findings of CIT (A), preferred an appeal before the Tribunal raising its grouse as Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 101 of 2004 4 to the deletion of above amount of `1,85,000/- and `61,788/- from the income of the assessee on account of foreign gifts. Certain other additions were made by the CIT(A), however, the same are not relevant for the adjudication of this appeal and hence they are not being referred herein. 5. The revenue thereafter filed an appeal before the Tribunal and the solitary effective ground raised was that the CIT (A) has erred both in law and on facts in deleting the addition of `1,85,000/- and `61788/- made by the Assessing Officer on account of foreign gifts. 6. The Tribunal with regard to gift of `1,85,000/- received from Mohinder Handa, held that it was through proper banking channel and Assessing Officer had made the addition without rebutting the assessee's explanation and the Assessing Officer had not adversely commented upon the evidence furnished by the assessee. The Tribunal also noted that Mohinder Handa had made a gift to Narinder Kumar Sekhri which became subject matter of consideration of the Tribunal and after considering the facts of the case, addition was deleted and there was no distinguishing feature and following the precedent, the order was confirmed. 7. With respect to the deletion of `61,788/-, the Tribunal though did not agree with the findings of CIT(A) regarding the period under assessment, but on merits, applying the same analogy, as adopted in the case of foreign gift received from Mohinder Handa, viz. the failure of the Assessing Officer to disapprove the assessee's contention and evidence in support of the genuineness of the gift, the Tribunal upheld the deletion and Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 101 of 2004 5 dismissed the appeal. 8. We have heard the learned counsel for the appellant- revenue as well as for the respondent and have perused the paper-book carefully. 9. In the instant case, two cash entries in favour of assessee-respondent by way of foreign gifts i.e. one of `1,85,000/- and other of `61,788/- made by Mohinder Handa and Piara Singh Johal respectively are in dispute. Though, the Assessing Officer doubted both the entries, but CIT(A) and the Tribunal held the same to be genuine. It is relevant to mention here that in ITA No. 250 of 2006, titled as Commissioner of Income Tax, Jalandhar-II Vs. Manoj Kumar Sekhri, decided on 4.10.2007, a Division Bench of this Court upheld the decision rendered by the Tribunal holding as genuine the foreign gift received by Manoj Kumar Sekhri (respondent-assessee herein) from Mohinder Handa, whose foreign gift is also in dispute in the present case, while following the principle of consistency as laid down by the Hon'ble Apex Court in Berger Paints India Ltd. Vs. CIT, (2004) 266 ITR-99. Thus, following the rule of consistency as enunciated in Berger's case (supra), the gift in favour of assessee by Mohinder Handa cannot be considered to be bogus and there is no ground to interfere with respect of this gift. 10. So far as the matter relating to gift made by Piara Singh Johal is concerned, it is a NRI gift from a stranger and it cannot be said to be genuine or valid nor out of love and affection. In ITA No. 12 of 2000, titled as The Commissioner of Income Tax, Jalandhar Vs. M/s Udham Singh & Sons, Goraya, Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 101 of 2004 6 decided on 20.12.2013, this Court while dealing with a situation where a gift was received by the assessee from a non-resident Indian with whom the assessee had no relationship, while relying upon various decisions rendered on the issue, held as under:- “9. The matter of receipt of foreign gifts even earlier had engaged attention of the courts. This Court in Lal Chand Kalra Versus CIT (1981) 22 CTR 135 had held that NRI gift from a stranger was neither genuine nor valid. This judgment was followed in Jaspal Singh Versus CIT (ITA No.256 of 2006) decided on 15.9.2006 by this Court as also judgment in Sajan Dass and Sons Versus CIT (2003) 264 ITR 435 by Hon'ble Delhi High Court. Recently, this Court in ITA No.498 of 2005 decided on 7.2.2011 titled Commissioner of Income Tax, Karnal Versus Puneet Singh had taken the same view holding as under: “We are of the view that the Assessing Officer and the CIT (A) were justified in holding that the gift in question was bogus and the Tribunal committed patent error in accepting the gift as genuine. Admittedly, the donor had no relationship with the assessee. He had no occasion to give the gift. He was not produced. His financial capacity was not established. His bank statement was not produced. The Tribunal failed to appreciate these facts. It, thus, committed patent error of law in holding that the assessee discharged onus on him to prove the genuineness of the gift. Its order is, thus, perverse. In identical situation, this Court held that NRI gift could not be accepted as genuine unless the assessee was able to prove natural love and affection and financial capacity of the donor. Observations of this Court in Jaspal Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 101 of 2004 7 Singh are:- “It is well settled that mere identification of donor and showing the movement of gift amount through banking channel is not enough to prove genuineness of the gift. The assessee was required to establish that the donor had the means and the gift was genuine, for natural love and affection. Reference in this regard may be made to the judgment of this Court in Lal Chand Kalra v. CIT, 22 CTR 135, judgment of Delhi High Court in Sajan Dass and Sons v. CIT, (2003) 264 ITR 435, CIT, West Bengal II v. Durga Prasad More, (1971)82 ITR 540 and Sumanti Dayal v. CIT, (1995) 214 ITR 801.” 10. Even this Bench in ITA No.72 of 1999 titled Shri Hanuman Dass Versus The Commissioner of Income Tax, Jalandhar and another decided on 22.11.2013 held as under: “Taking up the case in hand, even when the donor had the means to make the gifts, there being neither any relationship nor there being any circumstance to show natural love and affection of the donor for the donee nor there being any occasion to make such gifts to the assessee and the authority of jurisdictional High Court being against the assessee, the authority cited by the assessee as Commissioner of Income Tax v. R.S. Sibal, (2004) 269 ITR 429 does not support the case of the appellant. Thus, there is no perversity or impropriety in the impugned order and sequelly the same is upheld.” 11. Adverting to the facts of present case, here a person Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 101 of 2004 8 residing abroad had sent a gift to a stranger. He has not gifted a single penny to his family members residing in India and this amount could not have been deleted. There was no occasion for making the gift. 12. In view of the discussion made above, the findings of the Tribunal and the CIT(A) are not sustainable so far as deletion of amount of `61788/- is concerned. Consequently, the impugned orders are set aside to the extent given above and order of Assessing Officer in respect thereof is restored. We accordingly answer the question in favour of revenue relating to amount of `61788/-. The appeal is partly allowed. (AJAY KUMAR MITTAL) (ANITA CHAUDHRY) JUDGE JUDGE 29.01.2014 Jiten Sharma Jiten 2014.03.14 17:15 I attest to the accuracy and integrity of this document High Court Chandigarh "